Analyst
Sohail Ahmed Qureshi
sohail.ahmed@pacra.com
+92-42-35869504
www.pacra.com
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Related Research
PACRA Assigns Preliminary Ratings to Airlink Communication Limited- PPSTS-IV - PKR 3.0bln | TBI
Rating Type | Debt Instrument | |
Current (17-Jan-25 ) |
||
Action | Preliminary | |
Long Term | A+ | |
Short Term | A1 | |
Outlook | Stable | |
Rating Watch | - |
Airlink Communication Limited (“Airlink” or “the Company”) is principally engaged in two business verticals; i) mobile phones distributor and retailer, ii) assembling of smartphone and allied items in Pakistan. The ratings reflect Airlink’s strong business fundamentals, supported by its growing relative position, and its partnership with several renowned global brands, which ensure diversified earnings from its product portfolio. The ratings are further bolstered by the vertical integration of the Company’s operations; Airlink operates its own assembly line and owns Select Technologies (Pvt.) Limited, a wholly owned subsidiary focused on assembling mobile phones for Xiaomi Pakistan (Pvt.) Limited, a subsidiary of Xiaomi Corporation, a leading global brand from China. Xiaomi is expanding its market in Pakistan, both with existing and new products. According to the Pakistan Telecommunication Authority (PTA), 28.43mln mobile devices were manufactured in the first 11 months of CY24, compared to ~21.28mln devices during CY23, reflecting an annual growth of ~45.7%. Management reports that Airlink holds ~22% market share in mobile phone distribution. In FY24, the Company achieved significant revenue growth, with consolidated total sales of PKR 129,742 million. Revenue for the current financial year is expected to exceed this figure, with positive profitability indicators. Moving forward, Airlink plans to focus more on its assembly segment, especially by increasing the production volumes of Tecno mobile phones. The Company’s capital structure is leveraged, with a primary reliance on short-term borrowings. Despite this, its financial risk profile demonstrates good coverage ratios and healthy cash flows. However, the recent imposition of sales tax in FY25 has raised the Company’s working capital requirements in the distribution segment. Airlink manages its working capital through short-term borrowings, including debt instruments. The Company has also secured an exclusive partnership with Acer Gadget Inc. to assemble and introduce its product line, including laptops and tablets, to the local market, leveraging Airlink’s established nationwide distribution and retail network.
The underlying instrument is secured by a ranking charge over the Company’s current assets. The Issuer must maintain a Debt Payment Account (DPA) under the lien of the Investment Agent. Payments will begin 47 days before maturity and continue fortnightly to ensure the full issue amount is available in the DPA five days before maturity. Principal and profit repayment will be made in a bullet payment.
The Company’s ratings depend on its ability to maintain its market position in a rapidly evolving industry. Prudent financial discipline, particularly with regard to working capital management, is essential to sustaining these ratings, a principle to which management is fully committed.
About
the Entity
Airlink is a public listed company primarily engaged in the distribution and assembly of mobile phones and allied products. Mr. Muzaffar Hayat (CEO) and the family own a majority stake in the Company.
About
the Instrument
Airlink is set to issue its fourth Rated, Secured, Privately Placed, Short-Term Sukuk-IV, carrying a markup of 6MK+1.75% with a tenor of six months. While PPSTS-II of PKR 3.12 billion has been redeemed on January 10, 2025, PPSTS-III of PKR 4.0 billion of Airlink and PPSTS of PKR 4.0 billion of Select Technologies (Pvt.) Ltd. are currently in the market.